Are you considering purchasing a turnkey rental property? Are you interested in hosting AirBNB in your home or rental? Do you want to invest but are not currently working? Are you considering investing out-of-state? If you answered yes to any of those questions, today’s “Ask Bill” episode is just for you!
This is our monthly segment where Top Dawg Bill Manassero answers some of the real estate investing questions received during the month from emails, in-person conversations, phone calls or through online portals such as BiggerPockets.com and Quora.
Hi there. Just started to listen to your great podcasts, maybe about 10 or 15 so far. It’s refreshing that you’re not trying to sell/push something. I may be a little different to your normal demographic in that I’m 35 and looking to become an investor (passive). I have around 70K to cash to invest and trying to find my first investment. I feel that a single family home would be good but you seem to suggest multifamily in your podcast? My long-term vision is for 3 to 4K passive income. I can’t tell yet from your shows if you are for or against turnkey properties? They seem to solve a lot of my issues in that I don’t have the time to fix properties up or the time to go hunting due to my regular job/career. Curious if for someone my age if you would recommend that or finding traditional properties through an agent. Thanks and keep up the good work. Amit
Seasons greetings! Thanks for listening to our podcast!
Great question! My “official position” on turn-keys is to NOT buy them. However, I will qualify that by saying I also understand that if turn-key properties did all that the turn-key providers say they will, they would be great investments. Now, keep in mind, my first 4 properties were all turn-keys. I, like you, did not have time to do the rehab myself and it was just very easy. The problem with TK providers for me is the following:
I would encourage you to think “outside the box” before investing your $70K. Besides doing what most new investors might do when they first start out by investing in an inexpensive single family house and renting it out, consider the following:
Regarding using an agent, yes, that can be a great idea but the agent would have to be the right agent that understands the investor’s mindset.
Hi Bill! First of all I want to say you are ABSOLUTELY amazing. It’s so inspiring what you do. I’ve been following your blog for a while, but I haven’t been able to find an answer to my specific question. Is it possible to buy a house with the intention to rent it out when you don’t have a job? I have about $50,000 saved up. But I quit my job so I don’t have a steady income. How do I start? I rented out my apartment (still has a mortgage) that is giving me a cash flow. And I’m living with relatives now so I am not paying rent. I want to become an investor. Everywhere I look I need to have a job to be qualified for a mortgage to buy anything. How does it work to do this in retirement?
I would really appreciate your advice on this! -Ria
Thank you very much for your kind words.
I will attempt to answer your questions below:
First off, if the $50,000 is all you have and you don’t have a job, I don’t think I would spend it until you have a job. Also, if you have no emergency reserve fund, ala, Dave Ramsey (3-6 months “survival money’) I would also wait. When you get a job, then you can consider investing. When you invest, you don’t have access to those funds, unless you do a cash-out re-fi.
Is it possible to buy a (rental) house if you don’t have a job?
The simple answer is yes! If you pay cash for the full price of the house, you do not have to qualify for a loan. But my next question for you is, “Where do you live?” And, if you don’t live in an area where houses sell for $50,000, then are you willing to buy out-of-state? I was fortunate enough to purchase a duplex in Indianapolis for around $50,000. I was able to rent each side out for $650, which brings we Gross Rental Income of $1,300 per month. It’s definitely possible to find good rental properties in certain states.
But, if you want to buy near you and there are no houses for $50,000, and you don’t want to buy out-of-state, there are still a number of other options:
I hope that at least gives you some ideas to consider.
You also asked how bank loans work when you’re in retirement. Well, banks prefer W2 employees. They always have. If you don’t have W2 income they look at your other income (Social Security, Pension, rental property income, 1099 income, etc.) If they see you have a good credit score and steady money coming in, that can help but it doesn’t guarantee you’ll get the good loans. As you get into larger commercial properties (5 units or more) they look more at the profitability of the property and its business plan and less at you.
Well, I hope that helps answer your question. I hope all works out well for you.
I’m not an old dawg, 35, but still love your show! We own 12 units and are under contract on 26 more in the mid-west. I was interested in converting one of the units in the 26 unit (location is close to downtown/stuff) to AirBNB and was wondering if you’d recommend that route. I know you did this on your 22. Just curious about your experience and haven’t heard about it in a while.. I listened to your update a while back.
Thanks for writing and for your kind words about our podcast! It’s OK if you’re only 35. The way you’re moving into real estate investing, you probably have a few things to teach us Old Dawgs!
I think converting one of your 26 units to an AirBNB could possibly be a great idea. Being close to downtown could make it a strong alternative to hotels and that’s a key benefit of AirBNB. Have you checked AirDNA.co? They can give you some info on the market for AirBNB in the area. Also look in AirBNB for other apartment units being used for AirBNB and check out their rates, amenities, etc.
Regarding the AirBNB unit I have in my 22 unit Indy apartment, it has actually worked out quite well. I’ve had my issues but overall I think it is a big bonus. In the 5 months that I have had the unit, I have generated almost double what I would have with the same unit on a lease. I’m looking to add a second unit next year (2018).
Having an AirBNB unit in an apartment building is a different scenario than renting out someone’s extra room, guest house or home. There are some unique challenges and maybe even some advantages.
Here are a few things to consider:
If all of that seems OK to you, I’d say give it a shot.
I hope that helps answer your question. Let me know what you decide and if you have any questions.
I’m starting to invest after I lost several 4 plexes in Kentucky and almost lost my house. I reside in northern California, just about half an hour to San Francisco. I am interested in investing in Indianapolis, Indiana, and Atlanta, Georgia, I had problems with management and am fearing to invest out-of-state. I looked at several properties here in California which were about a couple hours drive but after running the numbers, the returns are pathetic and that’s why out-of-state seems to attract me because properties are cheap and easy to cash flow if I have the right team. Do you have any recommendations? Thank you. PS I enjoyed your podcast.
Thank you for listening to our podcast!
I can definitely relate to your dilemma. I also live in California and, because of the poor returns here, have had to invest out-of-state. I also am familiar with both Indianapolis and Atlanta where I have properties and the challenge of finding good property managers.
If you had problems before, I would be cautious before venturing into out-of-state investing. You definitely have to have the stomach for it. Yes, it can be lucrative but, at the same time, it is not without its challenges.
There’s no easy solution but if you do your due diligence, you can create a steady cash flow from out-of-state rentals. You’re right, building a good team is KEY to successful out-of-state investing. But before you build your team, you need to be clear on your goals. Why are you buying rental properties? How much do you need to generate monthly? How much do you have to invest? How will you achieve your goals, over what period of time? You must be crystal clear in those areas before you even purchase a property because your goals determine what types of properties you need to buy, where you need to buy them, at what price, to generate what cash flow.
In setting up your team, your property manager is your most important person on the ground. If this person or organization is weak, your entire operation will suffer.
I would recommend that you listen to a few key podcasts and read a few key articles on olddawgsreinetwork.com (if you haven’t done so already). See below:
I know that may seem like a lot of podcasts/articles to review but they should help you put together the team you need. Also, I have a list of great books in our resource section that should be helpful as well.
Well, That’s it for today!
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